Affordable Power: Gujarat Shows The Way

The state of Gujarat has taken the lead in reducing cost of electricity to consumers by taking advantage of the flexibility granted by the Centre in utilisation of domestic coal, a move that would also help fuel-starved private generating stations start operations and repay loans, potentially providing relief to the banking system reeling under bad loans.

Other states might also follow the Gujarat’slead as it would help their power distribution companies (discoms) reduce their revenue gaps and become commercially viable.

As per industry estimate, private coal-fired plants worth 28,000 mw capacity are currently idling away in the absence of fuel availability. These plants do not have coal supply pacts with Coal India.

The state has invited bids for procurement of 1,000 mw electricity from Independent Power Producers (IPPS) willing to sell electricity at a price of less than Rs 2.82 a unit.

As per data available with the Central Electricity Authority, tariffs for GSECL’s coal-fired plants vary Rs 2.92 a unit to Rs 5.42 a unit. That means huge savings for electricity consumers in the state.

As per the terms specified in the tender documents, the state government will transfer coal from Gujarat State Electricity Corporation (GSECL)-run generation stations to IPPs’ plants with higher operational efficiency.

Sellers will be selected through a reverse bidding process to be conducted on September 8. Successful plant would be able to sell electricity to the state from October 1, 2017 to June 30, 2018.

If the successful plant is close to the mines from where coal has to be diverted, then the state would save on fuel transportation costs as well.

GSECL has allocation from coalfield in Korba, Chhattisgarh and Korea Rewa, Madhya Pradesh in ratio of 80 and 20. The average landed cost of coal for the seven coal-based power units of GSECL is about Rs 4,812 per metric tonne, nearly half of which goes into paying transportation charges.

Besides, it will commensurately relieve burden on railways.

In May 2016, the Union Cabinet had approved the proposal for allowing flexibility in utilisation of domestic coal among power generating stations. The methodology for use of transferred coal in IPPs generating stations was set out by the Union power minister in February this year.

The policy provides for flexibility in coal utilisation at more efficient plants or at pit head plants, thereby reducing cost of generation.

Under the policy, state and central generating companies can invite bids for power procurement from IPPs and transfer their coal allocation to the successful developer.

A key condition of the policy is that the tariff quoted by the IPP should be less than the variable cost of generation for the utility’s plant whose coal has to be diverted.